E – PAYMENTS MECHANISMS
Unit 2.
E – PAYMENTS MECHANISMS
Meaning Of E-Payment
- Electronic payment systems allow financial institutions, businesses and the government to offer a variety of payment options to their customers.
- These systems include automated teller machines, debit cards, credit cards, mobile banking and payment of bills through the phone.
2.Reduced Costs
- E-payments systems result in reduced costs for both businesses and individuals. The use of Internet and the acquisition of computers and other machines save on operational and processing expenses.
- Expenditures in paper and postage is cut down along with time spent in executing personal transactions. These reduced costs benefit the customers who in turn need to pay only less fees associated with transferring money or making payments
3.Reliability
- The use of e-payments cancels out the use of drafting checks, transmitting cash and invoices for both businesses and customers.
- This allows for faster execution of transactions – for example, you do not have to wait for the 30 days required in invoicing transactions.
- Credit cards also allow for customers to partake in transactions without immediate cash.
4.Security
- The traditional payment systems confidential information are sent via post or physically visiting the transaction site.
- This can present a number of security risks – for example, your mail may get lost or fall into the wrong hands.
- Additionally, places where financial transactions take place can be targets for criminal attacks.
- E-payment systems offer encrypted services which protects the clients’ private information during transmission and you do not even have to leave your home.
i.PhonePe
- This Bangalore-based online payment app is India's first UPI-enabled payment app, backed by Walmart-owned Flipkart with over 300 million registered users across India.
- With PhonePe, you can transfer money, recharge, pay bills, shop online, book flights, invest, etc. You can link your bank account with your PhonePe account to make transactions. and can also make payments through PhonePe wallet, debit card, and credit card.
- Google Pay, formerly launched in India is a digital payment app from Google which utilizes the UPI to enable in-app, online, in-store, and in-person cashless transactions on mobile devices, tablets, smartwatches.
- Users can send and request money from other Google Pay users within India.
- Paytm (or pay through mobile) is one of India's largest mobile payments and e-commerce player. It allows cashless transactions through the Paytm app or Paytm website.
- Paytm wallet lets you store and send money from one wallet to another wallet or pay directly from your bank account using the UPI. You can recharge your mobile phones, metro cards, data cards, DTH cable and make utility bills payments, postpaid payments. Or book movies and travel tickets, do online shopping or use at various locations such as taxis, grocery shops, restaurants, malls, etc.
- Credit card is a plastic card which is issued by a bank.
- It is issued to customers of high credit ranking, the necessary information is stored in magnetic form on the card.
- A card holder can purchase the item from the shop or the showrooms and need not pay cash. He has to flash the card in machine at the place where he is making purchases.
- Banks issue credit card to the customers up to a certain limit.
- The customers can purchase goods/services from the authorized showrooms without carrying physical cash with them
- When a transaction is made from a debit card, the funds are withdrawn directly from the user’s bank account.
- It is the most common type of plastic money used by people.
- The majority of transactions are made while online shopping and ATM cash withdrawal.
- It is a plastic card with a microprocessor that can be loaded with funds to make transactions.
- It is also known as a chip card.
- E-Wallets a form of prepaid account that stores user’s financial data, like debit and credit card information to make an online transaction easier.
- There are various kinds of wallets.
- The Reserve Bank of India has three categories for wallets—closed, semi closed and open. A closed wallet can be used to buy goods and services exclusively from one company.
- Semi-closed wallets, on the other hand, can services, including financial services, at specified merchant locations, which have a specific contract with the issuer to accept the payment instruments.
- Open wallets can, however, be used for purchase of goods and services, including at merchant locations or point of sale terminals that accept cards, and also for cash withdrawal at ATMs or from business correspondents.
- These wallets can only be issued by banks.
- Money can be added using Net banking, and credit or debit cards. Prepaid wallets have on limits and validity periods.
- National Electronic Funds Transfer (NEFT) is an online system used for transferring small to large amounts of money from one financial entity to another within India.
- National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer.
- Under this Scheme, individuals, firms and corporate can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.
- Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches.
7.Real-Time Gross Settlement (RTGS)
- Real-Time Gross Settlement (RTGS) is a funds transfer system where funds of high quantity are transferred from one bank to another in ‘real-time’ and on a gross basis.
- ‘Real Time’ means the processing of instructions at the time they are received rather than at some later time; ‘Gross Settlement’ means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis).
- as the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.
- The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is 2 lakhs. There is no upper ceiling for RTGS transactions.
Electronic payment systems are not immune to the risk of fraud. The system uses a particularly vulnerable protocol to establish the identity of the person authorizing a payment. Passwords and security questions aren’t foolproof in determining the identity of a person. So long as the password and the answers to the security questions are correct, the system doesn’t care who’s on the other side. If someone gains access to your password or the answers to your security question, they will have gained access to your money and can steal it from you.
The law requires that businesses declare their financial transactions and provide paper records of them so that tax compliance can be verified. The problem with electronic systems is that they don’t fit very cleanly into this paradigm and so they can make the process of tax collection very frustrating for the Internal Revenue Service. It is at the business’s discretion to disclose payments received or made via electronic payment systems in a fiscal period, and the IRS has no way of knowing if it’s telling the truth or not. That makes it pretty easy to evade taxation.
One of the idiosyncrasies of electronic payment systems is that the payments aren’t handled by humans but by an automated electronic system. The system is prone to errors, particularly when it has to handle large amounts of payments on a frequent basis with many recipients involved. I
Impulse buying is already a risk that you face when you use non-electronic payment systems. It is magnified, however, when you’re able to buy things online at the click of a mouse. Impulse buying can become habitual and makes sticking to a budget almost impossible.
5.Dishonest providers and Merchants:
Those who exploit and sell consumers 'personal data in order to be used by advertisers in ads often use this data for fraud purposes.
- Stolen credentials or password
- Dishonest merchant
- Disputes over transaction
- Inappropriate use of transaction details
- Forged or copied instruments
- Disputed charges
- Insufficient funds in customer‘s account
- Unauthorized redistribution of purchased items
Features of Cyber Law
Due to the rapid progress in the technology sector, the usage of cyberspace has become a common practice. With this increase, it has a large number of pros but also a higher number of cons. Hence during the 21st century, the IT Act 2000 was introduced. This was implemented to ensure all online records and activities are brought under the spectrum of legal governance. India has been ranked to be in the top 5 amongst other nations for cyber threats. But it has only one strong law in place to face and fight any cyber crimes that are the IT ACT of 2000 and its amendments.
The Cyber Law IT act 2000 came into consideration on 17th October 2000 to deal with e-commerce and Cyber crime in India. Cyber law came into existence after the making of the Indian Constitution. So, it is a residuary subject handled by the Central Government and is not included in the three lists namely, Union, State, and Concurrent. According to the act following is the list of features of Cyber Law:
There are five predominant laws to cover when it comes to cybersecurity:
Information Technology Act, 2000
The Indian cyber laws are governed by the Information Technology Act, penned down back in 2000. The principal motivation behind this Act is to offer reliable legal inclusiveness to eCommerce, facilitating registration of real-time records with the Government. But with the cyber attackers getting sneakier, topped by the human tendency to misuse technology, a series of amendments followed.
The IT Act
The ITA, enacted by the Parliament of India, highlights the grievous punishments and penalties safeguarding the e-governance, e-banking, and e-commerce sectors. Now, the scope of ITA has been enhanced to encompass all the latest communication devices.
The IT Act is the salient one, guiding the entire Indian legislation to govern cybercrimes rigorously:
- Section 43 - Applicable to people who damage the computer systems without permission from the owner. The owner can fully claim compensation for the entire damage in such cases.
- Section 66 - Applicable in case a person is found to dishonestly or fraudulently committing any act referred to in section 43. The imprisonment term in such instances can mount up to three years or a fine of up to Rs. 5 lakh.
- Section 66B - Incorporates the punishments for fraudulently receiving stolen communication devices or computers, which confirms a probable three years imprisonment. This term can also be topped by Rs. 1 lakh fine, depending upon the severity.
- Section 66C - This section scrutinizes the identity thefts related to impostor digital signatures, hacking passwords, or other distinctive identification features. If proven guilty, imprisonment of three years might also be backed by Rs.1 lakh fine.
- Section 66 D - This section was inserted on-demand, focusing on punishing cheaters doing impersonation using computer resources.
Indian Penal Code (IPC) 1980
Identity thefts and associated cyber frauds are embodied in the Indian Penal Code (IPC), 1860 - invoked along with the Information Technology Act of 2000.
- The primary relevant section of the IPC covers cyber frauds:
- Forgery (Section 464) Forgery pre-planned for cheating (Section 468)
- False documentation (Section 465) Presenting a forged document as genuine (Section 471)
- Reputation damage (Section 469)
Companies Act of 2013
The corporate stakeholders refer to the Companies Act of 2013 as the legal obligation necessary for the refinement of daily operations. The directives of this Act cements all the required techno-legal compliances, putting the less compliant companies in a legal fix.
The Companies Act 2013 vested powers in the hands of the SFIO (Serious Frauds Investigation Office) to prosecute Indian companies and their directors.
The legislature ensured that all the regulatory compliance's are well-covered, including cyber forensics, e-discovery, and cyber security diligence.
The Companies (Management and Administration) Rules, 2014
It prescribes strict guidelines confirming the cyber security obligations and responsibilities upon the company directors and leaders.
NIST Compliance The Cyber security Framework (NCFS),
It is authorized by the National Institute of Standards and Technology (NIST), offers a harmonized approach to cyber security as the most reliable global certifying body. NIST Cyber security Framework encompasses all required guidelines, standards, and best practices to manage the cyber-related risks responsibly. This framework is prioritized on flexibility and cost-effectiveness. It promotes the resilience and protection of critical infrastructure by: Allowing better interpretation, management, and reduction of cyber security risks – to mitigate data loss, data misuse, and the subsequent restoration costs Determining the most important activities and critical operations - to focus on securing them Demonstrates the trust-worthiness of organizations who secure critical assets Helps to prioritize investments to maximize the cyber security ROI Addresses regulatory and contractual obligations Supports the wider information security program
By combining the NIST CSF framework with ISO/IEC 27001 - cyber security risk management becomes simplified. It also makes communication easier throughout the organization and across the supply chains via a common cyber security directive laid by NIST.
Cyber crimes can be controlled but it needs collaborative efforts of the lawmakers, the Internet or Network providers, the intercessors like banks and shopping sites, and, most importantly, the users. Only the prudent efforts of these stakeholders, ensuring their confinement to the law of the cyberland - can bring about online safety and resilience.
ROLE OF INTERNATIONAL LAWS
In various countries, areas of the computing and communication industries are regulated by governmental bodies There are specific rules on the uses to which computers and computer networks may be put, in particular there are rules on unauthorized access, data privacy and spamming There are also limits on the use of encryption and of equipment which may be used to defeat copy protection schemes There are laws governing trade on the Internet, taxation, consumer protection, and advertising There are laws on censorship versus freedom of expression, rules on public access to government information, and individual access to information held on them by private bodies Some states limit access to the Internet, by law as well as by technical means.
INTERNATIONAL LAW FOR CYBER CRIME Cybercrime is "international" that there are ‘no cyber-borders between countries’ The complexity in types and forms of cybercrime increases the difficulty to fight back fighting cybercrime calls for international cooperation Various organizations and governments have already made joint efforts in establishing global standards of legislation and law enforcement both on a regional and on an international scale
NATIONAL CYBER SECURITY POLICY National Cyber Security Policy is a policy framework by Department of Electronics and Information Technology. It aims at protecting the public and private infrastructure from cyberattacks. The policy also intends to safeguard "information, such as personal information (of web users), financial and banking information and sovereign data". This was particularly relevant in the wake of US National Security Agency (NSA) leaks that suggested the US government agencies are spying on Indian users, who have no legal or technical safeguards against it. Ministry of Communications and Information Technology (India) defines Cyberspace as a complex environment consisting of interactions between people, software services supported by worldwide distribution of information and communication technology.
To fight against the cybercrimes, the CBI has established the following special units:
Cyber Crimes Research and Development Unit
cyber Crime Investigation Cell
Cyber Forensics Laboratory
Network Monitoring Centre.
- Digital Signatures
- A digital signature is an electronic signature that can be used to authenticate the identity of the sender of a message or the signer of a document, and to ensure that the original content of the message or document that has been sent is unchanged. Digital signatures are easily transportable, cannot be imitated by someone else, and can be automatically time-stamped. A digital signature can be used with any kind of message, whether it is encrypted or plaintext.
- Digital Signatures provide the following three features:-
- Authentication- Digital signatures are used to authenticate the source of messages. The ownership of a digital signature key is bound to a specific user and thus a valid signature shows that the message was sent by that user.
- Integrity - In many scenarios, the sender and receiver of a message need assurance that the message has not been altered during transmission. Digital Signatures provide this feature by using cryptographic message digest functions
- Non Repudiation – Digital signatures ensure that the sender who has signed the information cannot at a later time deny having signed it.
Digital signatures are commonly used for software distribution, financial transactions,and in other cases where it is important to detect forgery or tampering.Digital signatures are often used to implement electronic signatures, a broader term that refers to any electronic data that carries the intent of a signature, but not all electronic signatures use digital signatures.
Legal Provisions for digital signature
Digital signatures and The Indian Penal Code
Indian penal code 1860 (IPC) is in operation in India very successfully for the last 152 years. Nobody seriously felt the need for an amendment because of its excellent draughtsmanship. But a need was felt for addition of certain provisions to take care of the new developments in the field of electronics and information technology. Thus through the Information Technology Amendment Act 2008 IPC was also amended. The salient features of the amendments are discussed below.
Section 73A has been inserted to provide the same provision as in section 47A of the Indian evidence Act discussed above in this article. Section 464 has also been amended to provide that the said section shall be made applicable to electronic records and electronic signatures also. Section 464 deals with situations when a person is said to make false document or electronic record. Section 466 provides for forging of electronic records also. There are amendments to sections 4, 40,118,119 also which are not dealt with in this article for want of space.
E-payment in paperless society significance
In your day-to-day operations, going paperless can be a huge improvement of work-life satisfaction and efficiency. Though it is not necessarily the answer for every business, there are some tempting benefits to implementing paperless methods. According to Inc., there is more to be saved by doing this than previously considered.
Paperless payment processing saves time, space and money, and is also eco-friendly. Eliminating the need for paper documents will also eliminate boxes of old records taking up valuable space. It will also save the time it takes to put all of those records together. Digital files are all invisibly stored in one compact space while still being accessible in multiple locations. While paperless office operations continue to trend, paperless payment processing is also rising at an impossibly fast rate.
Paperless in payment processing
Business owners everywhere are always looking for ways to operate as smoothly as possible, especially with payment processing. Tech companies and payment processors are coming out with digital innovations to make the payment processing experience quicker and more seamless for consumers and merchants alike.Paperless payments are not just a functional necessity, but also a strategic asset in business that can set you up for long term success. To be sure that they stay on this track for your business, there are a few things to keep in mind.
A Change Involves Everyone-Making digital updates to your payment processing does not just affect your accounting department. Be sure to convey the values and benefits of digital payments to all departments and leaders within your business.
More is Better-The more payment processing options you offer, the more customers you will have. Customers like to have options for paying, and there are numerous digital payment processing methods available. The more options you have, the more business growth you encourage.
If you don’t currently have a digital, paperless payment processing system in place, or are looking to make updates to your current system, it is time to start taking steps. The first step: research a payment processor. With all that goes into running a business, payments can be a lot to keep track of yourself.
Not only are businesses becoming more digital, but so is payment processing. Going paperless with your daily operations as well as your payments is an easy transition with the availability of new technologies. Lose some of that paper weight and join the digital realm with a seamless, paperless business.
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